#405 - Christopher Zook - Founder of CAZ Investments - Building An $11B Alternative Investment Platform

Summary

POWERS Podcast #405 — Christopher Zook: Building an $11B Alternative Investment Platform

Guest: Christopher Zook, Founder of CAZ Investments
Host: Chris Powers
Date: March 10, 2026
Episode Focus: Deep dive into CAZ Investments’ journey from inception to leading the alternative investment platform space, the evolution of “irresistible offers,” GP Stakes dominance, the strategic partnership with Tony Robbins, private market democratization, and the business of investing in sports franchises.

---

Episode Overview

In this candid and insightful conversation, Christopher Zook, founder of CAZ Investments, retraces his journey from humble origins and game-changing inspiration from Tony Robbins to building an $11B alternative investment powerhouse. He and host Chris Powers unpack the evolution of CAZ’s business model, their “irresistible offer” for investors, the nuances of investing in asset management ("GP stakes") and sports teams, lessons of alignment, strategic partnerships, and the ongoing push to democratize access to high-performing alternative assets.

---

Key Discussion Points & Insights

1. Origins and the Tony Robbins Spark

• Early Inspiration: Zook describes a pivotal moment early in his career, spurred by a Tony Robbins tape series that catalyzed a goal-setting journey:

  • Quote: “Part of that you go through a goal setting workshop… it was that point that I set a goal to open up CAZ Investments… nine years and nine months later, indeed, we opened the doors.” — Christopher Zook [05:00]

• Initial Vision: The idea was always to invest his own (and close partners’) money first, then allow others to join. CAZ was built on track record, not mass marketing. This “Field of Dreams” approach worked slowly, until a transformative moment forced a marketing rethink.

2. The Locker Room Revelation & Capital Formation

• Catalyst for Change: In 2013, Zook was confronted by an acquaintance angered at not being told about CAZ’s lucrative subprime short (via John Paulson). This prompted a shift toward transparency and “telling everyone” about their investment themes, triggering rapid network and capital growth.

  • Quote: “He threw me against my locker… ‘why in the blank didn’t you tell me that?’… From that point on we just started telling everybody. And… a lot of people did [invest].” — Christopher Zook [08:07]

• New Playbook: Realizing the need for a systematic approach to capital formation, Zook found himself returning to Tony Robbins:

  • Attends Tony Robbins’ Business Mastery event in 2014, learning the power of the Irresistible Offer—designing a business proposition no competitor can match.

3. The “Irresistible Offer” & Radical Fee Alignment

• Original Irresistible Offer (2014): CAZ becomes the largest investor in every deal and eliminates management fees, charging only when investors make money—radically aligning client/firm incentives.

  • Quote: “We were always the largest investor in everything we did... The irresistible offer is we're the largest and we don't get paid unless you make money.” — Christopher Zook [13:02]

• Business Model Risk: This model upended industry norms and entailed “going straight into the red” for years while waiting for performance fees—not management fees—to accrue.

  • Quote: “For four years, we didn’t make any money after making money for 13, which is kind of a big shock for people.” — [17:06]

• Strategic Capital: To facilitate this model, CAZ required supportive shareholders and creative financial structuring—later supercharged by Tony Robbins’ partnership.

4. Partnership with Tony Robbins: Strategic Alignment & Scale

• How the Deal Happened: After Robbins became a client, a dinner led to Zook telling the full story of Robbins’ early impact on CAZ. This set in motion a strategic partnership, with Tony joining as an investor and growth partner in 2021.

  • Partnership brought not just cash but enormous strategic value: network access, enhanced credibility, best-selling co-authored book, and much faster scaling.
  • Quote: “Tony brought not only… economic value, but they also brought strategic value… doors we couldn’t open. Credibility, etc.” — [21:09]

• Result: In four years, CAZ’s AUM grew from ~$3B to $11B and headcount from ~17 to 80+.

• On Partnerships vs. Control: Zook emphasizes the tradeoff between full ownership/control and larger impact with aligned, strategic partners.

  • Quote: “You have to make the decision of why you want to [take on partners]… But it depends on who the partner is… you better like each other.” — [24:31]

5. High-Performance Firm Building & Family Alignment

• Zook underscores the personal/familial aspect of major growth leaps, crediting his wife Lisa’s discernment and joint decision-making in their journey.
  • Quote: “After a couple of these mistakes... if we’re not both aligned on this, God does not say to me, do this, and her not do this. God doesn’t play games like that.” — [34:34]

---

6. GP Stakes: The Business Model & CAZ’s Dominance

• GP Stakes 101: CAZ pioneered investing in minority stakes (“GP stakes”) of alternative asset management firms:

  • Managers get management fees (steady, contractually locked) & potential upside (“carry”)—akin to a bootmaker getting paid no matter what, with a bonus for quality.
  • Quote: “That is every single private asset management firm, because they raise money for a fund, they get a management fee no matter what… and you might turn that $4 billion into 8. And that’s an $800 million carried interest. That’s how you become a billionaire.” — [00:00], repeated at [37:22]

• Why It’s a Great Business: Enormous operating leverage, recurring revenue, downside protected (hard to “get fired”), and scalable.

• CAZ’s Edge: Largest investor in the secondary market for GP stakes (about 75% market share). Their relationships with major investors (e.g., Dial, Blackstone, North American power players) make them the “Switzerland” of the space—able to move quickly and credibly in buying positions.

  • Quote: “We have about 75% market share of the secondary market for GP stakes, which is a fascinating thing most people don’t think about.” — [41:48]
  • On Exits: “...All the vehicles that were created for GP stakes are perpetual. They do not have an exit… now we’re 12 years in...” — [42:03]

• Underwriting Approach:

  • Diligence includes manager track record, team quality, growth models, balance sheet, and—crucially—alignment and the motivations of the people involved.
  • Key driver: can the manager keep raising funds and sustainably grow revenues?

• On Diversification & Risk:

  • Some asset types (like tech/venture) are less predictable in their carried interest and require discounted valuations or even exclusion for prudent underwriting.
  • Quote: “We want all of these firms to perform well for their partners... But the main thing is, can they raise more money?” — [47:51]

---

7. Alignment—The Core Principle

• CAZ is obsessed with aligning incentives between managers, investors, partners, and themselves:
  • Largest investors in their own deals.
  • No outside “cherry-picking” deals for management’s personal accounts.
  • Strict controls on GP companies’ compensation and use of proceeds (e.g., “Monet clause”: can’t use capital to buy non-business assets).
  • Reject situations where family succession or self-dealing could create conflicts.
  • Quote: “There’s no guarantees in this world ever. But good decisions usually are made when there’s good alignment.” — [49:11]
  • Quote: “I don’t do anything outside our firm at all... I invest only in the things that my investors are in.” — [68:11]

---

8. Sports Team Investing:The New Alternative Asset

• Entry & Skepticism: CAZ hesitated at first, seeing sports franchises as “trophy assets for billionaires.” Breakthrough came with the realization that cord-cutting and the migration to live-streamed sports made sports media rights explosively valuable.

  • Quote: “In 2005, 15 of the top 100 live programs watched were sports; in 2025, 97 were sports.” — [75:00]

• Why It Works (In U.S. Big Four Sports)

  • Franchises are local monopolies with contractual, recurring distributions: "Dividend" checks to each NFL team now exceed $400M/year.
  • Revenue is stable (contractual media, stadium, and advertising deals), costs predictable (league/union-negotiated). Large growth in streaming and international markets.
  • Sports and GP stakes share structural similarity: annuity-like, high-visibility revenue with upside optionality.

• Not All Sports Are Equal

  • European football, minor leagues, and others are riskier investments (relegation, less media dominance, less aligned controls).
  • Quote: “There are countless billionaires that have lost enormous money on European football teams… it's the opposite effect.” — [83:39]

---

9. The Push for Alternative Investment Democratization

• Recent Regulatory Change: The SEC now allows anyone—regardless of accreditation—to invest as little as $2,500 into alternatives like SpaceX or the Astros via CAZ funds. This was a major policy change enabling the democratization of private market access.
• Strategic Direction: CAZ has launched an “all-access” fund to harness this, providing diversified exposure to a host of private assets for broader investor bases—removing former barriers around minimums and accreditation.
  • Quote: “In five years…I think... exponential growth among the number of people that can invest in alternatives that have never been able to before. And that’s going to create opportunity…” — [86:32]

---

10. Closing Reflections and Five-Year Vision

• Looking Forward: Zook expects continued explosive growth for CAZ and the alternatives industry among a much wider base of investors, greater product democratization, more accessible diversification.
• Wisdom for Entrepreneurs: The importance of understanding the “why” and “who” in business partnerships, obsessive focus on alignment, and the willingness to make radical bets on conviction themes, backed by deep work and well-developed playbooks.

---

Notable Quotes & Memorable Moments

On Alignment and Fees:

• “We’re the largest investor in everything we do. We just didn’t message that well. The irresistible offer is we’re the largest and we don’t get paid unless you make money.” — Christopher Zook [13:02]

On Strategic Partnerships:

• “Tony brought not only economic value, but strategic value—open doors we couldn’t open.” — [21:09]

On Family and Wise Counsel:

• “If we’re not both aligned on this, God does not say to me, do this, and her not do this. God doesn’t play games like that… Husbands, your wife is your greatest asset. Or not.” — [34:34], [35:09]

On What Makes an Advantageous Business Model:

• “It’s got enormous operating leverage. It’s the best economic model, period. Enterprise software is close, but there’s no better business model.” — [39:31]

On the Theme Behind Sports:

• “The theme is cord cutting. People are moving from broadcasting cable to streaming… I see the roadmap, we’re in.” — [75:00]

On the Future of Alternatives:

• “Literally anyone in the world, at a $2,500 minimum, can now invest and own a piece of SpaceX and the Astros… that didn’t exist literally eight months ago…” — [86:32]

---

Important Timestamps

• [04:23] — How Tony Robbins inspired CAZ’s creation
• [08:07] — The locker room confrontation and shift to broader disclosure
• [09:48] — Attending Business Mastery; discovering the “irresistible offer”
• [13:01] — Removing management fees, implementing true alignment
• [21:09] — Details of the Tony Robbins partnership
• [28:13] — On personal motivation and faith-guided business
• [34:34] — The role of family alignment and spousal counsel
• [37:22] — GP Stakes bootmaker analogy and business model breakdown
• [41:48] — CAZ establishes dominance in the GP Stakes secondary market
• [67:24] — Concrete examples of real alignment vs. lip service
• [75:00] — Sports investing breakthrough: The cord-cutting/streaming theme
• [86:32] — SEC shifts access, CAZ opens alternatives to all investors
• [91:23] — Closing reflections and vision for the future

---

Summary

This episode is an essential listen for anyone interested in alternative investing, capital formation, and building enduring, principles-driven businesses. It’s dense with actionable wisdom, strategic frameworks, and personal stories—reframing how financial incentives and human alignment can drive outsized, ethical, and durable success.

Core Takeaways:

• Relentlessly align incentives—true partnership requires shared skin in the game and radical transparency.
• Success often comes from re-thinking industry norms (fees, ownership structures, capital formation).
• Partnerships—if strategically chosen—can exponentially accelerate achievement beyond what sole control allows.
• The future of alternatives is inclusivity—lowering barriers for broader wealth creation via private markets.
• Themes matter: clarity about “why now” (e.g., cord-cutting, GP economics) is critical for conviction.
• Family, faith, and personal integrity are inseparable from business success.

CAZ’s story is a case study in how to build a world-class alternative investment platform on timeless principles, bold innovation, and fanatical alignment.

---

Transcript

[Christopher Zook]

Imagine you're a boot maker. You have a customer that agrees to buy a million dollars worth of boots from you. And it doesn't matter. If you do deliver them on time, in the right size and the right skin and the right color, you still get your million bucks. But in the contract, it also says that if you deliver them on time, in the right shade and the right color and the right skin, you actually get an extra million bucks. That is every single private asset management firm, because they raise money for a fund, they get a management fee no matter what. If they invest the money successfully, they get this thing called carried interest or incentive fees, performance fees. So typically 2% management fee, 20% of the upside. So in that instance, you have $1 billion fund, you're going to make 20 million a year for five years and they cannot fire you. That's $100 million of revenue. And you know exactly when it's going to come in. So the opposite of my irresistible offer is these people know exactly what their budget needs to be for the next five years. It's pretty easy to make money when you do that. But you turn the billion into 2 billion. If you're good at what you do, you make $200 million. So off a $1 billion fund, you make $300 million. That's a really good business model because you can't get fired. And so worst case, you make a hundred million. Best case, you might make 300, 400, 500. And then likely you go start another fund and you raise $2 billion or you raise $4 billion. And now you're making, I don't know, 80 million a year, every year, guaranteed, contractually. And you might turn that $4 billion into 8. And that's an $800 million carried interest. Well, last time I checked, that's how you become a billionaire.

[Ramp.com Advertiser]

Every time the end of the year hits, some well intentioned member of the finance team makes the same resolution. Next year we're getting our expense management process under control, they say, and by February, they're back to drowning in receipts.

[Christopher Zook]

Here's.

[Ramp.com Advertiser]

Here's the thing. You can't fix a broken system with better intentions. You fix it by automating the parts that waste everybody's time. Most companies are still using corporate cards that were designed before smartphones existed. A card is swiped, then someone has to manually upload the receipt, enter the details, code it to the right account, and the chase down approvals. It's busy work masquerading as finance ramp eliminates all these manual tasks and replaces Them with an expense management platform that runs itself. Receipts get captured automatically, transactions get coded in real time. Approvals happen. With one click, your team closes the books three times faster. And that's not marketing speak. That's actually what happens. So if you're tired of making the same resolution every year, try ramp.com powers. Give your finance team something they've been wishing for. Expense reports that write themselves. Approvals that take seconds instead of days, and a month end close that doesn't require overtime.

[Christopher Zook]

All right, y' all have heard me

[Podcast Host]

talk about better pitch for years on the podcast. I'm super proud of their founder, Nico, who is a great friend of mine. He's one of the best young entrepreneurs I've come across. And in just two years, he's built an incredible company that is now rebranding as Collateral Partners. And honestly, it makes perfect sense. From single family investment decks to complete brand overhauls, ongoing partnership support to market research, they deliver institutional grade work that actually moves capital. Think of them as the difference between looking like a startup and operating like an institution. They're really your entire institutional marketing department. The team you wish you had in house but can't justify hiring ex Goldman directors who understand your business, ex PE associates who craft your narrative, and world class designers who make it all look effortless. Go check out collateral.com and mention the Powers podcast and they'll give you a complimentary one pager. Enjoy the episode. Christopher, welcome to Fort Worth.

[Christopher Zook]

Thank you. I'm glad to be here. Love Fort Worth.

[Podcast Host]

I told you, you have the purple tie. You're going to get in anywhere today.

[Christopher Zook]

That's perfect.

[Podcast Host]

All right. I wanted to start in a spot that I thought was super interesting. So you read a book or. No, I'm sorry, you. You read a series of letters or series on Tony Robbins 25 years ago and that became the, the catalyst or the spark to how to start cas. So maybe what did you read and what happened after that?

[Christopher Zook]

Yeah, it's, it's, it's funny because of the fact that I was working really hard, I was fresh out of school and I got home late night one night like 11 o' clock from the office, warm myself up some dinner and I'm watching TV just to decompress and I see this very large human being on TV with big hair and big teeth. It was one of his original infomercials.

[Podcast Host]

Okay.

[Christopher Zook]

And I ordered the tape series because I loved what I heard. And Lisa, my wife and I did the 30 day tape series, you know, back on cassettes for Those who remember actually a cassette tape.

[Podcast Host]

Wow.

[Christopher Zook]

And part of that you go through a goal setting workshop.

[Podcast Host]

Okay.

[Christopher Zook]

And it's your 1 year, 3 year, 5 year, 10 year goals, et cetera. And. And so it was that point that I set a goal to open up CAS Investments.

[Podcast Host]

Okay.

[Christopher Zook]

Knew the name of the firm, knew kind of what the business model was within 10 years. And then nine years and nine months later, indeed, we opened the doors of CAS. And obviously that's not a coincidence.

[Podcast Host]

Okay, so that would have, I guess you would have been, what, early 30s when you launched?

[Christopher Zook]

I was, I was 31 when I launched the firm.

[Podcast Host]

What was the initial vision for CAS? I think you just celebrated your 25 year anniversary. What was the initial vision?

[Christopher Zook]

So the initial vision was very similar to what it is now. I mean, we've always been about investing our own money. Yeah. And then allowing other people to come alongside of us. And I got into the industry because I just love managing money, I love investing. And we wanted to be able to do things that were not necessarily plain vanilla, but do them in an advantaged way. Not just to do something. To do something. And so fortunately, I was backed by a very, very good group of shareholders that helped put me in business. And so my job every day and our team's job every day was to go figure out where to invest their capital for them. Obviously, you know, at that time, the amount that my family could invest alongside of that, which was great because I got to come along for the ride, if you will, and then open it up to a broader network. But we really, we didn't market. It was very naive, candidly. It was the field of dreams model. Build it and they will come. Yeah, we had a really awesome track record for 13 years and they never came. You know, we grew, you know, a little bit at a time by referral, but it wasn't until 2014 and in a pretty seminal event that caused us to say, hey, we actually really need to tell people what we're doing so that that way we can expand the network because it helps everybody.

[Podcast Host]

What was that event?

[Christopher Zook]

So it's a, it's a fun story and a frightening story at the same time.

[Podcast Host]

I like those.

[Christopher Zook]

In 2007, we, you know, were very convinced that the housing bubble was going to burst. Okay. And that subprime mortgages were just going to get destroyed and happened to have a long term relationship with a guy by the name of John Paulson. I'd invested with John since 1994.

[Podcast Host]

Okay.

[Christopher Zook]

So when he told us about what he was Doing to short subprime. It was a no brainer for us. And so we created a vehicle specifically for that purpose and obviously did really well. And it more, more than that, and this is important to the story more than we did really well. It was a much easier time for us because when everybody else was so stressed out, we were wondering what to go buy. We made a lot more money on what we bought after the global financial crisis than even the short of the subprime. But so fast forward, it's now 2013, basically, okay? And I'm a member of River Oaks in Houston Country Club. And there was a guy that I played golf with a couple of times who basically came up and threw me against my locker. I mean, like this. Like I said, I don't know what I did. Tell me what I did and I'll. I'll fix it. And he goes, I'll clean it up for, for this purpose. But he says, you know, Zook, I am really, really upset with you. He said something different. But I said, as I said, you tell me what it is, I'll fix it. He's probably 20 years my senior, so I figure, you know, I can take him if I have to, but I didn't want to. I was like, look, I'll fix this. Just tell me what I did. He says, I heard you shorted subprime. I said, yes, sir. He goes, why in the blank didn't you tell me that? And I said, you're not a client of our firm. You're not supposed to prospect in the locker room. That's a real thing. Why would I have told you? He said, you do not have a blankety blank, blank, blank, blank, blank. Right. To tell me what my family is interested in and what we're not. You tell me everything you're doing with your money and I'll decide if I want to invest. I said, you know what? You're right, and I apologize. So from that point on, we just started telling everybody. And literally it was like this. I don't care if you invest. I'm doing this with my money. I just don't want to be thrown against my locker. So tell me. If you want to invest, great. If you don't, that's fine too. Well, as we turn, as it turns out, a lot of people did. And so that was actually the catalyst to go out and build a team that would communicate to folks, because we knew that the bigger the network became, the more we could write larger checks, which gives us more access and better negotiating power. Et Cetera, et cetera. And literally at that time, we had about 300 investors. Now we have 8,700 of them.

[Podcast Host]

Okay. So you come out of. You come out of the locker room, you realize you basically need to build capital formation.

[Christopher Zook]

That's right.

[Podcast Host]

Did you go find a playbook that already worked? Did you dream up your own system? How did you think about capital formation?

[Christopher Zook]

I went to where I've really always gone, which was to Tony, to Tony Robbins. I had continued to follow his work for, you know, whatever. That was 12 years at that point. 22 years at that point. But I'd never gone to any one of his live events. I'd always just done the tape series and CDs as they went to CDs. And so I was like, you know, there's got to be a way for me to not just try to figure this out on my own.

[Podcast Host]

Yeah.

[Christopher Zook]

Because, you know, as he says, success leaves clues. So let me go figure out how to model what others have done successfully. So he has a program called Business Mastery. I went to that program in January of 2014. Okay. I'd actually gone to Date with Destiny, which is a completely different program. Anybody's ever watched the Netflix I'm not your guru documentary. That is Date with Destiny.

[Podcast Host]

Okay.

[Christopher Zook]

So Day with Destiny is all about, you know, an individual kind of designing your own destiny.

[Podcast Host]

Yeah.

[Christopher Zook]

And it was totally life changing for me. And I tell everybody, you know, if somebody goes plays all out, their life will be changed after that. This is not an advertisement for Tony, but he's changed my life. And I say this all the time, publicly, many places other than my Lord and savior, Jesus Christ and my wife, nobody's had a bigger impact on me than Tony, period. Nobody. Wow. So I went to the event, David. Destiny changed my life. I immediately signed up for Business Mastery. That was literally the next month.

[Podcast Host]

Okay.

[Christopher Zook]

I went to that and designed what he refers to as the irresistible offer. What is it that nobody else can compete with you on and how do you build out a business plan to do that? And I designed it over six days of literally 18 hours plus a day. It's an immersion kind of event. And came back and literally transformed the company from the ground up 100% over the next year or so.

[Podcast Host]

When you showed up, did you already have in mind what the irresistible offer was or did? Is that what you get out of six days?

[Christopher Zook]

He. You.

[Podcast Host]

You've. You uncover it through?

[Christopher Zook]

That's exactly. You know, I, I had no idea what the even concept was because it's not Something he really talks about another. Other settings. I mean, he may have. And I just missed it. But in his case, the irresistible offer is if you go to Business Mastery and after the first day, you don't see $1 million of value, you get all your money back and you walk away. Right. No, lose. Like it's expensive, but million bucks of value or the cost of admission sounds like a good trade. And they, you know, really work with you over the course of that six days to what can you do in your industry? Whether somebody is a real estate person or an investment person or, you know, selling ice cream, whatever it is, what is it that they can do that's totally different, that makes them stand out from their competitors and. And just makes it really easy for, you know, customers or investors to say yes.

[Podcast Host]

Okay, so the magic question, what's the irresistible offer?

[Christopher Zook]

So back then, and it's changed a little bit just because scale brings other benefits, but back then, it was really simple. We were always the largest investor in everything we did. We just didn't message that very well. Didn't know how to market. I was an investment person, I'm not a marketing person.

[Podcast Host]

Right.

[Christopher Zook]

And so we didn't really communicate that we're the largest in what we do. But we said, you know what, we're not going to charge management fees at all. We're just going to take care. So the irresistible offer is we're the largest and we don't get paid unless you make money. It doesn't guarantee it's going to work, but we are aligned. And people go, hmm, that's different. You're not just raising money for the sake of getting a management fee. You actually believe this thing's going to work, then we're very fortunate that we've done really well for people with a very high batting average. But what it did is we had to completely change the business model. Because if you don't know when you're going to get paid, you have to have a different setup. Right. And that is where it's a fascinating story of, you know, we had to completely reshift our balance sheet, our focus, you know, make sure that we were right sized for that. Because we had a pretty good idea that we were going to make money and how much we were going to make, but we had no idea when it could have been a year, could have been six years, it could have been never. So you have to be able to withstand the ups and downs, which is why virtually nobody does that. Well, immediately people are like, I don't Know if I'm interested, but that's different. And I'll listen.

[Podcast Host]

Yep.

[Christopher Zook]

And then all of a sudden they realize that we have access to, you know, a firm like an ncap. Yep. You know, largest private equity focused energy and energy focused private equity firm in the world. Or our partnership, you know, with a Robert Smith at Vista, or partnership with hig, or partnership with some of, you know, John Paulson. Yeah. And people are like, okay, so I can get into that. I can't get in on my own. And you're not going to charge me anything other than a percentage of the profits if I win. And the answer's yes. And they go, hmm, okay. And then all of a sudden you start stacking these various, you know, opportunities. They start germinating and throwing off profits, which then we could reinvest in the business that allowed us to grow our team. And then ultimately, Fast forward to 2021 and actually Tony became an investor with us, and that's what led to the book and. And other things.

[Podcast Host]

Okay, so when you go back to when you launched the firm, were you charging fees at that point or. Okay, so you had. So this 2014 was the dividing moment of we're no longer going to charge fees. We're going to move to this model.

[Christopher Zook]

Board thought I was nuts.

[Podcast Host]

Well, I think you're nuts. I have so many questions, so can we go a little deeper on that? Sure. How do you. So how you do if you're just a executive now, looking at how are we going to operate this business for. We don't know when the cash is coming? Is that you just going, I'm going to make a huge bet on the firm. I might go into the red for a while, but I'm almost betting on the come.

[Christopher Zook]

No, no, we absolutely went straight into the red.

[Podcast Host]

Okay.

[Christopher Zook]

And I mean, we literally. That's why my board thought I was nuts. Yep. You know, our shareholders, though, have always been there to help us grow. Yeah. Right. What I told them in literally, you know, 2001, when they first invested, you know, I don't need a check. What I need is you to help us grow and help us find great investments, help us evaluate them.

[Podcast Host]

Yeah.

[Christopher Zook]

So we selected them very intentionally based on sector specialization, you know, that kind of thing. Yeah. But so we went to them and said, look, this is what we're going to do and we're going to need you to provide balance sheet flexibility for us because we're going to lose money first.

[Podcast Host]

Yep.

[Christopher Zook]

And, you know, having invested for a long time, it's Just the J curve.

[Podcast Host]

Yeah.

[Christopher Zook]

Of we're going to lose money for some number of years, but we should. If you model it out with any level of success, we should do much, much, much better. And there's actually others in the industry that have, you know, I don't want to say copy this, but they have adopted similar approaches. The difference is you can't scale because you can't go hire 50 people unless you have a really big balance sheet, in which case, as an entrepreneur, you're going to end up giving up so much of the business that you start to misalign interests there. And so we created some really unique structures. I'm very proud of that. What is the necessity as the mother of invention?

[Podcast Host]

Right.

[Christopher Zook]

We created some fantastic ways to monetize what was the opportunity set to be able to, you know, benefit from what was going to be there. But we didn't know for sure when it was going to be there. And so for four years, we didn't make any money after making money for 13, which is kind of a big shock for people.

[Podcast Host]

Yep.

[Christopher Zook]

But it's the reason we did the transaction with Tony, which I can go into as much as you want, but please do now. So Tony became a client of the firm in 18. I had nothing to do with it. I didn't even know he was talking to our firm because he was working through his partner, A.J. gupta, who ran his kind of family office. Yeah. A.J. was introduced by a gentleman that runs a hedge fund that had become an investor of ours.

[Podcast Host]

Okay.

[Christopher Zook]

He had worked with Paul Tudor Jones. Well, it's very well documented. Tony's worked with Paul Tudor Jones since the 80s. Okay. Very closely.

[Podcast Host]

Yeah. Yeah.

[Christopher Zook]

So Ash.

[Podcast Host]

As a coach and as a coach.

[Christopher Zook]

As a coach and a guide. And so gentlemen in Florida that had invested with us because, you know, it's just a networking world. He came to our themes event in Houston to watch a guy by the name of Peter Cecchini speak at our very first themes event. He's like, this firm's different. I want to invest. Irresistible offer was in place. He goes, I love this. I want in. He told aj, AJ became an investor in the GP stakes world, where we bought a piece of a company called Monroe Capital, because they already knew Monroe. Like, hey, I actually get to buy a piece of the company, not just invest in their funds. Yes, great. We're in. So one of my partners comes in and he goes, christopher, Tony Robbins just became a client. And I just was in the middle of something. I turned around, I said, tony who? And he goes, no, Christopher, you know the guy that you quote like every day. He just became a client because I hadn't met Tony, I'd met him in passing, but literally never had spent any time with Tony. Yeah. So fast forward 2020, 2020. He had had a position in creative planning, the wealth management firm, financial planning firm, et cetera. Really great firm. He helped them grow dramatically and they're a wonderful business. Tony sold his stake to General Atlantic, the private equity firm. So in the non compete, he couldn't compete in wealth management, financial planning. Well, obviously that's not who we are. So met with aj, Tony's son Josh, and they had no idea my history with Tony and that he had changed my life. None. They hear it a lot, but he changed a lot of lives. But they had no, no idea that that was the case. And they said, we got to tell Tony this. This was like after a five hour dinner. Tony goes, I had no idea, I want to meet him. Went to Palm beach, had a 13 hour meeting literally at Tony's house. And we crafted out a partnership. But here's, you know, we're known as the largest investor in GP stakes. Right. I mean we're the largest in the world. We have 75% of the market share for secondary purchases in GP stakes. And this is exactly what a GP stake is supposed to look like. He goes, okay, what problems in your business do you need to solve for or challenges? And I said, the irresistible offer is great, but I can't go hire 30 people tomorrow. But the opportunity sets so huge. I know I'm leaving tons of money on the table. And over the course of that conversation, great, here's what we'll do. Tony put money on the balance sheet. Nobody took any money out. Tony, Josh and AJ became partners that then gave us the capital to grow growth capital to go out and hire ahead using the irresistible offer to be able to have a compelling story to tell people. And by that point had become pretty good at it. And from there, literally. We did that transaction in May of 2021 and we have grown from two and a half, almost 3 billion to 11 billion in four years. Four and a half years.

[Podcast Host]

God, there's so much I want to unpack on this.

[Christopher Zook]

Well, let me add one other thing because I think it's important. I left it out and I shouldn't have. The other thing is just wasn't a check though. Yeah, because he brought strategic value. Tony has a very large network and a very large platform. So things like writing the book together, I mean it was a New York Times number one bestseller. Yeah, if Christopher Zuck had written that book, it would have been well received, but it would not have been number one on the New York Times bestseller list because it didn't have the brand associated like it does with Tony. So Tony brought not only and Josh and AJ Economic value, but they also bought strategic value to be able to open doors that we couldn't open. Credibility, et cetera. And I'd already had that playbook a little bit. It's very well known publicly that all four of the founding partners of NCAP were shareholders of cas. The Cockrell family is who really started me in business. Ernie's one of the most well respected people, you know, in Texas, and they were just phenomenal partners. But so I already had seen that that gives you credibility. I mean, if I go talk to somebody in Midland, you know, whether it be Cody or someone else, they already know that if NCAP is investors in your company, then, you know, the individuals, not the company ncap, but the individuals. This is, this is, this is legit. And so just that credibility opens doors and then that ultimately leads to, we still got to perform, but it gives us the ability to do things we wouldn't necessarily be able to do either at all or certainly a lot faster.

[Podcast Host]

I mean, you basically just answered the question. So I'm basically just regurgitating what you said. But I think this is something like every entrepreneur needs to hear. You can either own a bigger piece of a smaller pie and say, I don't need Tony in I'm already at 3 billion, or you clearly probably in that 13 hours, but probably over a long period of time. And you just said you did it with the end cap. People said, as long as my small piece of a bigger pie is with these people, let's keep riding. What's the again? Maybe the answer is there, but if somebody's sitting here listening to this, going, okay, what are the next steps I take to take a smaller piece of this pie? Like, how do you get over the hump? Because you had something that was working,

[Christopher Zook]

it's really hard because you, you clearly have a level of accountability. And you know, for a lot of entrepreneurs, they have full autonomy. Well, once you have shareholders, you don't. Whether or not they are in your business or not, you still have a fiduciary responsibility to do a great job for them. So you can't just be fully autonomous. There's a lot of entrepreneurs that can't get past that. I have one of my shareholders that literally he gets mad at me every time that we award equity to our team, every time that we want to do something, like we were doing with Tony, oh, we don't need that. We'll just keep it all for ourselves. And I had to help him understand that, you know, the only way to make this pie much bigger is to align people and give them incentives. And so this will help us all do better. He's a believer now, but he fought me for years. And in his company, he literally has never given equity to any of his employees. He's never given equity to an outsider. He owns 100% of it and he's done really well and that works for him. This is such a fast moving world though.

[Podcast Host]

Yeah.

[Christopher Zook]

And you know, we now own stakes in over a hundred different private asset management firms, all minority stakes. And so it's the classic illustration of we're willing to back people who want to bet on themselves. If they want to grow and they need capital for some reason to solve for that, we want to provide it to them. But there's accountability that comes with that. For so many entrepreneurs. They're afraid of it, and so they just say, well, I'm just going to keep it, you know, my, my full pie to myself or maybe with some of my key team members. What I will say is you have to make the decision of the why you want to do that. And it's totally fine. If somebody has the desire to stay small but fully controlled, that's okay. But why do they want to do that? Is it out of fear? Is it out of lack of conviction or afraid of messing up? Or is it because of the fact that that's really the right thing for them? If somebody wants to grow just for growth sake and they don't have a good why, it's going to end badly. The other thing is, it really does. I cannot stress this enough. It depends on who the partner is, right? Don't take money from non strategic people just for the sake of taking a check. Unless it's your last check. You want to sell, sell to the highest bidder, no problem. Otherwise it should be a strategic buyer or a strategic investor because y' all are going to be married and you better like each other.

[Podcast Host]

When you got to Palm beach for that 13 hour meeting, did you already know a deal was going to happen or did it, like were you already 90% there or did you. So the question is like, what, what do you remember from that 13 hour meeting? What were the turning points in that meeting that made it clear that you're obviously bringing in one of the world's greats. You're clearly great at what you do, but you kind of started the meeting with, like, this is a coin flip.

[Christopher Zook]

So the. The. The conversation going into it was that there might be something really interesting strategically to do.

[Podcast Host]

Okay.

[Christopher Zook]

At that point, it did not involve any of those conversations, involve Tony actually buying a piece of. It was just. Let's explore that. You know, we do something really, really unique in the investment world. Tony obviously has a very, very big platform. Seems like there might be something to do there. That's how it started. That was it. Tony was the one who said, look, you know, and I don't want to speak for him, but he said this on. On air before. Christopher basically parrots back what Tony says better than Tony does some days. Yeah. Right. Because I've just lived it for my entire adult life. And one of the things that he talks about a ton, which is where focus goes, energy flows, and if you have the right people involved and success lose clues, and you model the right people and you can pour an accelerant on a business, you can dramatically grow that business. But you got to be prepared for what that feels like and what it looks like. And so he said, you know, one plus one could definitely equal a lot more than two here. What does that look like? What are your needs? And he does such a great job in all of his communication of understanding what the psychology is of the person that he's talking about. What is it that they're afraid of? What is it that they're excited about? What is it that really motivates them? And in my particular case, he was able to explore my motivation as being impactful. Again, as somebody is strong in my faith. It's like I'm here for a purpose and to do whatever God wants me to do, whenever he wants me to do it, however he wants me to do it. My job is to say yes and be faithful. All right. And he's like, great. How big do you want it? And I said, as big as God wants it.

[Podcast Host]

Yeah.

[Christopher Zook]

And he goes, are you really prepared to do that? I said, ask my team. Nobody outworks Christopher. Nobody. And if it ever changes, then I probably need to exit stage left at that point in time.

[Podcast Host]

Yeah.

[Christopher Zook]

I love what I do, and I work incessantly.

[Podcast Host]

Yeah.

[Christopher Zook]

Sometimes neither. Make sure I slow it down. That's a different conversation. But it is something to wear. I love it. And when you meet passion with hopefully some. Some ability, and I believe that, you know, I've got You know, some, some. Some really good wisdom over the years that has been guided that it's something that you could do, something really unique. But so that's how the conversation went and was like, okay, we want to do the irresistible offer, but we need to solve for this. How do we solve for this in a way that allows us to really accelerate the growth? And then what are the channels do you want to go into? We had already started morphing.

[Podcast Host]

And what were you solving for?

[Christopher Zook]

So how do you go hire a whole bunch of people when you don't know when you're going to get paid to do what?

[Podcast Host]

To, to bring in deals? To raise capital.

[Christopher Zook]

To raise capital, primarily. Okay, so we already had an out. And this is a. Another tip of the hat, if you will, to Tony's business mastery is. I'd never heard Peter Drucker's quote, which is, you know, business is just effectively innovation and marketing. That's it. On the innovation side, we were world class. On the marketing side, we were at 21, we were pretty good at it, but we were not world class. And so, okay, how do we become world class at this to match our innovation? Another word would be manufacturing. We have a manufacturing machine. We get to look at 2,000 investments a year, pick and choose what we want from some of the most unique things that other people can't get. Well, that's great as long as you have the ability to fund them. To fund them. And so this lag effect of, okay, we can reinvest profits when they come in, when things harvest, how do we accelerate that? And that was capital formation was the primary solve there, but also the solve was as you grow an organization, maintaining culture. And what does that look like? Well, we knew we needed to hire more professional management because at that point, I basically was, you know, every role in the firm and way involved in too many things that I shouldn't be because they weren't. I was either the best at it or they weren't the best use of my skill set. So we needed to do that. Well, you need capital to do that. You need stability to do that. When you don't know when your budget's going to be, there's a little less stability. And so you add all those together, it became pretty easy. Fix the balance sheet, hire the right people, have somebody that's world class in helping us develop those people in the case of Tony, and then go out and tell the world what we do on a much broader stage. That all adds up to be very successful. We still got to execute. And every day, I mean, my team gets tired of hearing me say this. We are a 25 year old startup. We run like that every day. We think like that every day. And ultimately it's about how do we truly stay ahead and maintain the moat that we have in a world that changes really, really fast.

[Podcast Host]

And you said, you said one thing. You said you got to know Tony had questioned you and he said, are you sure you. And you said, I think you got to know what it feels like and you got to know what it looks like. Can you expand on the feels like? Like, what does it feel like to go from 3 billion to 11 billion in four years?

[Christopher Zook]

The best person to ask that question is my wife, Lisa. So very short version, I became an empty nester at a young age because Lisa and I are high school sweethearts. Been together since I was 15 years old. We got married when I was 20. She likes to tell people she got me young enough to train me. There's a lot of truth to that. But. So she's two years older and we got married when she graduated from Texas Tech and I obviously had another year and a half. I graduated high school early to be with her. But so because of that, our son was born when I was 25. So he. When he was only child. So at 18, he left the house. At 43, I became an empty nester. Yeah. So I had the opportunity to do things that people with young children might not be able to do. And I came back from Palm beach and the first thing I did is I said, sweetheart, we gotta have a conversation. Because after at that time, 20 years, you know, there's a lot of people and we've been very blessed, could just chill and slow down. And I said, sweetheart, if we do this, it is going to be on like Donkey Kong and it's going to be a sprint like we haven't seen since I started in the industry. And if we're not willing to make that sacrifice, we shouldn't do this. And so we prayed about it hard because of the fact that, you know, is this what God wants us to do? And we just felt totally compelled that yes, this is. This is a door that was open for a reason. To allow you and your family to be more impactful for his kingdom. So go, run, do this. And it's exhausting, but it's also invigorating.

[Podcast Host]

Yeah, I can tell.

[Christopher Zook]

So we really do have a lot of fun. And we've gone from, I mean, 16, 17 people to 80 plus over that period of Time.

[Podcast Host]

Dang.

[Christopher Zook]

All in Houston now. Not all in Houston. We do have people all over the country now, primarily in capital formation. Yeah. Home offices in Houston. We have about 60 people in Houston. The rest are around the country.

[Podcast Host]

You'll be episode 405. So Todd Peterson. 403. There's a guy named Chris Huckabee that'll come between this.

[Ramp.com Advertiser]

404.

[Podcast Host]

This is the third episode in a row that the person that I'm talking to's most critical decision came after consulting the wife. That is a common thread that's going on.

[Christopher Zook]

Well, I mean, I, I, I, I say it all the time. I've really made two major, major mistakes in my life. Both of them. Lisa was like, this is a bad idea. And I was like, sweetheart, I got this. You know, there's the old saying of, you know, that the Holy Spirit speaks to wives more than, than men. Okay. I am. Not necessarily. It's more, but differently. I'll just, I'll say it that way. I believe that my wife does have the gift of discernment.

[Podcast Host]

Yeah.

[Christopher Zook]

I think I, you know, it's one of my gifts. But she is very wise. And ultimately, I realized after a couple of these mistakes that was like, if we're not both aligned on this, God does not say to me, do this, and her not do this. God doesn't play games like that. Yeah. And if we're not unified, then we're just going to wait.

[Podcast Host]

Yeah.

[Christopher Zook]

And we're going to continue to pray about it. We're going to explore. And there's been many things that I was like, this is so exciting. I want to do this. And she's like, well, I don't know. Yeah. That used to frustrate me to no end. Okay. Because every male knows the next thing I'm going to say.

[Podcast Host]

Yeah.

[Christopher Zook]

Why, Honey? I don't know. I can't tell you. It just doesn't feel right. As a guy, I just, like, I gotta understand. I can't tell you that's infuriating for most men. And I have learned as I've gotten, hopefully older and wiser. Okay. I need to try to figure it out because I really need to have a little more tangible reason for this. But when you and I continue to pray about it, let's talk through it. And inevitably it comes back to either I get convicted that that was not a good idea, or she comes to a point to where this feels much better to me because I understand it more, or whatever the reason is. But I'll tell you, you know, Husbands, your wife is your greatest asset. Or not. Yep. And the more you cherish her and the more that you lift her up and the more that you two are in prayer together, the more that you're likely to have a really, really good, wise counselor. That can be very impactful for any decision, minor or major.

[Podcast Host]

You know Terry Looper.

[Christopher Zook]

Absolutely.

[Podcast Host]

You read his book. I have Getting neutral. That's basically what you just went through is like getting neutral, which sometimes is frustrating.

[Christopher Zook]

It's very frustrating. It's been a long time since I read the book. I had actually forgotten, you know, that concept. But, you know, it's, it's something to wear as a hard charger, you know, for those that know the disc profile. A D on the disc profile. You know, I just want to run through a wall. I mean, I'm a former football player. I coached high school football. I mean, just testosterone. Let's go.

[Podcast Host]

Yeah.

[Christopher Zook]

You know, follow Tony for 35 years. I mean, that's pretty, you know, like, let's just figure out how to do it and do it yesterday. Getting neutral is hard.

[Podcast Host]

Okay. Let's talk about what you are the best at or what you have the largest market share in GP stakes. How did this all come about? And, and I, and I really want to dive deep into how it came about, how it works, how you've set it all up and why it's, it's, it's become kind of the leading horse. It cas.

[Christopher Zook]

Imagine you're a boot maker.

[Podcast Host]

Okay.

[Christopher Zook]

And you have a customer that agrees to buy a million dollars worth of boots from you. Yeah. In the next year.

[Podcast Host]

Okay.

[Christopher Zook]

And it doesn't matter. If you do deliver them on time, in the right size and the right skin and the right color, you still get your million bucks.

[Podcast Host]

Yeah.

[Christopher Zook]

No matter what. It's a really good customer. Yeah. But in the contract, it also says that if you deliver them on time, in the right shade and the right color and the right skin, you actually get an extra million bucks. Hey, I want that customer. That is every single private asset management firm. Because they raise money for a fund, they get a management fee no matter what. Even if they don't even invest the money, they get a management fee. If they invest the money successfully, they get this thing called carried interest or incentive fees, performance fees. So typically, again, there's different, higher, lower 2 and 20. Most people are familiar with the 2 and 22% management fee come Hades or high water, 20% of the upside. So in that instance, you have a billion dollar fund, you're going to make 20 million a year for five years and they cannot fire you. That's $100 million of revenue. And you know exactly when it's going to come in. So the opposite of my irresistible offer is these people know exactly what their budget needs to be for the next five years. It's pretty easy to make money when you do that. Yep. But you turn the billion into 2 billion. If you're good at what you do, you make $200 million. So off a $1 billion fund, you make $300 million. That's a really good business model because you can't get fired. And so worst case, you make 100 million. Best case, you might make 300, 400, 500. And then likely you go start another fund and you raise $2 billion or you raise $4 billion, and now you're making, I don't know, 80 million a year every year, guaranteed, contractually. And you might turn that $4 billion into 8. And that's an $800 million carried interest. Well, last time I checked, that's how you become a billionaire.

[Podcast Host]

Yeah.

[Christopher Zook]

So that business model is advantaged. And oh, by the way, it doesn't take twice as many people to raise a twice as big fund.

[Podcast Host]

Right, right.

[Christopher Zook]

Twice as large a fund scale as well. So it's got enormous operating leverage. It's the best economic model, period. Enterprise software is close, but there's no better business model. So that's the what how it works. Back in 2013, the GP Stakes really didn't exist, except for in hedge funds, where somebody would buy 20% of a hedge fund manager, they would get to participate in the upside ownership of that hedge fund manager. We passed on that because in a hedge fund you get your management fees, but people can leave the building. If you don't do well after two years, you're out of business. You do great after two years, you're going to make a gazillion dollars. Oh, yeah, but it's a binary outcome. I don't like investing in binary outcomes. I like positive asymmetry, low amount of downside, lots of upside. It's hard to find, but when you can find it, you want to lean in. When 2013, the industry changed, it actually began to move into the world of private assets. So one of your former guests, Barry Starnick Starwood, sold a stake, minority interest,

[Podcast Host]

and he did that because he wanted. He wanted more capital on the balance

[Christopher Zook]

sheet to go grow. That's exactly right. It was growth capital. It's funny, Michael Reese from Dial was our original partner and still Our largest partner in this area. You know, we had him on our podcast, the Holy Grail Investing podcast, and literally we joked that he messed up because we shouldn't have called it GP Stakes. It should have been called GP Growth Capital. Yeah, right. It is what it is. People know it as GP Stakes. But so Barry wanted to grow his business. Then Robert Smith Vista sold a stake in their business. Then the four guys at NCAP sold a stake in their business. And I was obviously very close to that situation because of my relationship with them and I'm like, I like this business model. So we immediately went full deep dive and about eight months later understood what it worked, became a large investor in it. Then we saw it continue to prove concept and then ultimately we're the largest investor now in the world. We've allocated about $9 billion total. A lot of that's obviously harvested at this point in time. And we have about 75% market share of the secondary market for GP stakes, which is a fascinating thing that most people don't think about.

[Podcast Host]

Yeah, what's that?

[Christopher Zook]

Going back to my point, if you're going to sell a stake in your business to somebody, you better like them. Yeah. So imagine that, you know, you. Somebody's a private equity manager.

[Podcast Host]

Yeah.

[Christopher Zook]

They sell 20 of their firm to someone.

[Podcast Host]

Cass.

[Christopher Zook]

To Cass. All right. But in the contract it says, by the way, after five years we have to be able to sell it and you can't tell us who we can sell it to.

[Podcast Host]

You as CAS have. Can sell it.

[Christopher Zook]

Can sell it without the permission of the gp.

[Podcast Host]

Yeah.

[Christopher Zook]

Right. You're gonna like. No, no, I want to know. I want to know who's going to be on my cap table and who's going to be in my boardroom. Right. As a result, all the vehicles that were created for GP stakes are perpetual. They do not have an exit. You know, most people are familiar with most partnerships or like a five year investment period, a ten year life, maybe two on your options. That's not true in the world of GP stakes because it needs to be perpetual. Well, they've done really well. But now we're 12 years in and the industry's grown from 13 billion in total market cap to 120 billion in market cap. And this is private holdings. There's a lot of people that have done really well that are like, at some point I do need to exit this position or you have a change in the cio, they want to put their own stamp on the new portfolio or an estate needs to sell it to disperse Whatever the case might be, there's no definitive exit path, so they have to sell in the secondary market. Well, we're the largest investor with everyone in GP stakes. Basically we're Dial's largest investor. We're Blackstone's largest investor. We're one of Peter's Hills key partners, Hunter Points key partners. You go down those. Bon Accord's largest investor by a factor of many. So we are effectively Switzerland and we invest and partner with everybody. So if you're going to call someone to buy this asset from you, we already have models on everything. We're already pre approved by all the sponsors to buy it. We already know all the assets themselves and we can be the fastest bid that they'll ever see. We'll be the fastest no in the West. That's actually a thing for our team. We'll be the fastest no in the west or we'll be very thoughtful. But we literally gave somebody a bid. They had to close quickly for some reasons that were very episodic for them. They came to us and said, here's the asset. Do you know it already own it. Great. We need to close in two weeks. And the sponsors agreed to facilitate this for us. What's your price at that point in time? We gave them a fair price, but a really fair price to us because we could move quickly and we can move in almost unlimited size. We did a half a billion dollar GP stake secondary transaction. It was a very limited process. There was only five people allowed to bid, period, by the sponsor because whoever bought it was going to be the largest investor in their fund and be on their LPAC and all that kind of stuff. Limited Partner Advisory Council. So they're like only five people can do it. These were all big firms. We were the only one that could write a full half a billion dollar check in that one investment. So our price didn't necessarily have to be the highest in order to be able to win that. So it's a very unique position in the market.

[Podcast Host]

Okay, so what do you, when you are going to look at a gp, what are you underwriting? You're underwriting their track record, how many funds they've already raised, who the team is, are. You're obviously underwriting what assets are in those funds that they've raised and then you're underwriting their ability to continue to raise funds going forward.

[Christopher Zook]

That's 100% correct. You couldn't have said it. I couldn't have said any better than you just did.

[Podcast Host]

But you have to go through each

[Christopher Zook]

fund and Underwrite every, every single one of them. Obviously we've got great partners that we work with.

[Podcast Host]

Yeah.

[Christopher Zook]

But you know, this is a deep domain expertise for us, so we could do it just as well as they can. But the good news is we can partner with them. They have, you know, teams that we can collaborate with. But you've got to look at every fund that's in the ground, every business plan as to how they're going to grow, you know, what their limited partner base looks like. Are they going to go into the private, you know, private market, the high net worth market, the retail market, are they going to stay institutional? You know, are they really in this for the long run? Are they doing this for the right reasons? If it's beach money, right, somebody just wants to go to the beach, that's fine. It's just not going to be that interesting to us because it's really all about growth. The thing about the GP stakes world and just private asset management and business in general is what's most valuable is the contractual management fees, the management fees that just, you can't lose annuity and typically 60% operating margins for these businesses just on management fees. So then the variability comes from carry. It's going to be lumpy and you got to try to predict the best you can, but you're going to pay a lot lower multiple for that because of its uncertainty.

[Podcast Host]

Because when you're buying in, you're buying existing carry that might already exist in funds that are already. So it's not a carry. In every future deal, you're also buying a discount of okay, that's exactly right. Got it.

[Christopher Zook]

Everything in the ground, everything they put in the ground forever. That's what a classic GP stake is. And there's other variability in how deals can get structured, but that's the way almost all of them are set up. And so as a result of that, what you end up with is, you know, the management fees. It's really easy because it is what it is. Their operating margins, their expense levels, those kinds of things. The carry is going to be much more lumpy, unpredictable. And so you have to buy that cheaper. But you also got to really understand it. Right. And I'll come back to that as why that's uniquely challenging in some industries in a second. Because it's a common question I get. But then from there you also look at what's on the balance sheet, how much they have in their own funds, underwrite what that should generate in returns, and then what's the enterprise value look like. Going forward, that's going to be based on growth. And it's a little crass to say it this way, but we want all of these firms to perform well for their partners, for sure. But the main thing is can they raise more money?

[Podcast Host]

Yeah.

[Christopher Zook]

So they have to generally generate enough return to be able to grow. But they don't have to be top decile like we would want if we're an LP and we're just investing in their fund because their margin of safety is they're still going to get paid a lot even if they just do. Okay. Now, I chair the investment committee for the State of Texas Pension Review Board and I see this all the time. The number one thing that people who run pensions or foundations, endowments, their number one goal in life is to not get fired. Okay. There's nothing against them, but everybody's that way. If you can go out and hire a fund that's really, really large, that's very stable and that's a well known brand, you're never going to get fired for that decision. Right. If you go out and hire somebody that's brand new, that's never done this before and it doesn't work, you might get kicked out, Right? Yeah. So in that situation, the large firms, the larger middle market are the firms that are more established. They just have an advantage because those kinds of investors are always going to be willing to allocate capital to them as long as they do well enough. So it's all about basically modeling out the growth rate. You discount it back to current day, what's a fair price. And again, you're not buying 100% buying, let's say 12%.

[Podcast Host]

Okay.

[Christopher Zook]

So they own 88% and so they have a huge incentive and huge alignment. You know, we have a saying we're freakish about alignment. You know, there's no guarantees in this world ever. But good decisions usually are made when there's good alignment. There's frequently bad decisions made when there's battleign. Right. So what we try to really look for is this, you know, freakish alignment where we're going to buy 12, you're going to use it as growth capital, you're going to keep 88. It's going to be worth a lot more. Tony bought a minority interest in our business. It's been a phenomenal return for him because it helped us accelerate our growth. That's what we're looking in. Somebody else. I said I would come back to one thing that is a common question. Yep. Because people will look at the Hundred different firms we own stakes in and there's very few technology companies in there. We own a stake of NEA and, and something like Synovus in, in, in London or you look at firms like Silver Lake, okay, These are big, big, big firms. In the case of NEA, been around for 40 years. It's very hard to predict their carry. But they're a very significant stable institution that's going to be around for a long time. But you're going to have to value that carry a lot lower. I know they're one of the largest investors in databricks. I know what it's worth right now on paper. But ultimately I've been around. I lived through the tech bubble. I made a lot of money shorting during the tech bubble. Only thing price that matters is when the lockup comes off, right? If it goes public or then when you sell it. So you cannot give like, okay, you know, we're early investors in OpenAI ChatGPT. I know what it's worth on paper and it's beautiful. But until we exit it, it's not real. So we have to look at that from the same perspective of these firms may have this huge amount of carry or they may end up with very little. So it's more about the management fees, et cetera, but so you can't value them the same. And some of those firms do not want to sell a stake because they just don't think it's valued enough. Or if it's venture, true, classic venture, you just can't do it. It's really hard because there's no way to underwrite what something is going to be worth. When we invested with a firm in Silicon Valley, they put $3 million out of a $300 million fund into Solana to help start it. They've taken out 1.2 billion of a $3 million investment or whatever the round numbers, there's still a lot of value there. I obviously would never be able to predict that, nor they, they put a small position in because obviously it was very high risk. That's why you tend to see a lot more stable businesses like a HIG or a Vista or a Starwood or a Silver Lake or a Platinum Equity or a Gallup Capital or Monroe Capital. These are firms that are really, really solid businesses, 20, 30 years old that are expected to continue to grow.

[Podcast Host]

Can I challenge you? Please invest a technology platform.

[Christopher Zook]

It is. So enterprise software certainly would fit in tech.

[Podcast Host]

Got it.

[Christopher Zook]

It's not venture. They're not early stage. They're control Buyout. Got it. Doesn't mean there's not businesses. It's mature businesses. They will get involved a little bit earlier sometimes, but mainly more from a credit standpoint, and there's more risk. But, you know, literally, it gets a great example because when we bought into Vista alongside Dial, it was a $13 billion firm, about the same size as we are today. It's $120 billion today in less than a decade. So, you know, today they're a lot more volatile, potentially in their market, but at the time it was an emerging growth company. You know, same thing like a Clear Lake. Clear Lake was 8 billion. Now they're 100 billion. So there are other firms that we're investing in today that are 6, 7, 8, $9 billion. Today. They have the potential to be 30, 40, 50 billion. I just can't tell you for sure which ones are going to be. Which is why you diversify and you don't do just one.

[Podcast Host]

Is that like a power law thing? Is that just where the world's going, where these. There's going to be fewer bigger managers and there's just not going to be a lot of small managers anymore? Or is that just a sign of the cycle? Like, how do you think about that?

[Christopher Zook]

I think there is some cycle, and I do think that there's some systemic aspect to it. What a lot of institutions have learned is it's hard to keep track of 30 or 40 different sponsors. Right. So let's just lean in on 10 or 12 or 15. Again, I see this all the time in the. In the pensions here in Texas. I'd rather have fewer, safer, higher quality, that at least I can stay in touch with them because a lot of people don't appreciate. You might have a $3 billion pension that has three people on staff. That's it. Whereas, you know, you would think that that big of a deployer of capital would have lots and lots of team, but that's just not the way they're set up. And so they need to have a streamlined operation. At the same time, there's a lot of data that indicates that the best performance comes from newer funds. Right. Funds one, fund two, wildly outperform fund. Sixes and sevens and eights. That is definitely some of why that will always exist.

[Podcast Host]

Yeah.

[Christopher Zook]

But if 401ks do become a real thing. Well, what's.

[Podcast Host]

What do you mean by a real thing?

[Christopher Zook]

So the Department of Labor has said that, yes, you're allowed to put alternative investments into a 401k plan. Yeah. But under the Biden administration that came back and said, if you do it, that's a really bad idea, which means nobody did it because they were afraid of getting sued. And if the President of the United States says that's a bad idea, well, what's your defense? Right. So nothing happened. Then President Trump was reelected and he came out and said, I think it's a great idea. And people are now trying to feel their way through it.

[Podcast Host]

Got it.

[Christopher Zook]

But everybody's number one objective is how do you make sure that you don't get, you know, get sued candidly.

[Podcast Host]

Right.

[Christopher Zook]

So once it does become much more prominent. Right. If you're the sponsor of a 401k plan, your job is to give a full menu of options to your participant for them to choose from. Yeah. If you have to choose 10 different sponsors to give them 10 choices, that's a lot more difficult than if you can choose two that each have five right across asset class. So that is a big, big trend. We think that what's going to happen is a hollowing out of the middle market size firm. The big firms will acquire the middle market firms and these small firms will become middle market and they'll get acquired. Because I do think, I mean, we've had in our portfolio, you know, here in Dallas, you know, HPS sold to BlackRock, you have Monroe sold to a European company called Wendell. You know, you have many transactions, arcmont sold and nuveen. These are transactions that are going to continue to accelerate because the large firms, they already have all the relationships. They just need different offerings to show those relationships. But I think they'll always be the entrepreneurs who are spinning out of a larger firm. They want to have their own opportunity to be able to prove that they can do it. And they're going to need a lot of backing. So we do a lot of GP seeding as well.

[Podcast Host]

Can I just move over real quick to the OpenAI comment? So when I think about that, when, like when you're writing a check, I, I, I would assume the larger the checks get, maybe it's, it doesn't have to be an open AI discussion. It's more things like that where you're getting in a huge slug of private capital into these things on paper that look amazing. Is it a situation where the larger the check you write, maybe you have a little more flexibility with what you can do with those shares. And I'll ask you, from this standpoint, I've been an angel in a lot of deals. Small check, they don't care in the least about Me on their cap table. I was in the seed round. Things happen. Valuation goes up. I'm ringing the bell, can I get out of this deal? I'll sell at a discount. I'm very often met with same thing. We don't want anybody on the cap table. If you could even get anybody to respond and you just kind of sit in the deal. I've been in some of these deals since 2013. I would imagine if you're writing a larger check or something in the position that y' all in, it's not just money out. We're praying until the end. What advantage do you have to writing these big checks in these big firms that maybe an angel wouldn't or an individual wouldn't?

[Christopher Zook]

I'll answer three different ways. The first is, the bigger the check, the more negotiating power you have.

[Podcast Host]

Okay.

[Christopher Zook]

So a lot of times we can secure in advance the documentation to say you go public. You have to distribute shares. You can't just hang on to them. Yep. Right. So within some reasonable period of time, however that's defined in negotiations. So that's a common thing we'll ask for, because you do want to have that flexibility. If it's a private company still, sometimes we'll have the ability to say, look, we really want to sell some of our position. Yeah. You know, we were early investors in Andrew. Andrew's got, obviously, an amazing growth story. And we sold a small amount of our position simply because of the fact that it was becoming too large.

[Podcast Host]

How do you do that? You go to an investment bank and you could.

[Christopher Zook]

In our case, we had somebody that actually approached us that we knew already and that we actually partner with on occasion. And they're like, look, you know, we know that, you know, they get the copy that's cap table. Like, y' all are, you know, meaningful. We'd like to buy some of your position or all of it. And then it just becomes a negotiation. But you still gotta have the company's approval. So, you know, not gonna say that. Palmer personally, you know, took a look at that. Of whether or not they would sell. But they knew the buyer. Right. They didn't care that we were, you know, reducing some of our exposure because the fund it was in now is a very large position, which is a beautiful thing, but also, from a diversification standpoint, can become problematic. We still have massive confidence in the company. Hindsight, I kind of wish we wouldn't have sold some of that, but that's what risk management is, and that's what our investors pay us to do. Is to make sure we understand both sides of the equation, you know, to make sure we can live with the worst case. I mean, it's always been our mantra. What's the worst case scenario? If we live with that, the upside will take care of itself.

[Podcast Host]

Yeah.

[Christopher Zook]

So the first way is you negotiate that in advance. The second way is when you are large enough, you're in the conversations about what the game plan is and you can say, look, you know, totally agree with that. But if you're going to do a tender of some kind for your employees or whatever, we want to have, you know, tag along rights to, to, to do that. And usually they're going to say that's fine, but we also got to be able to drag along as well. And as long as it's fair, no problem. The third way is that in most of these situations we have very specific partners that are involved. In the case of OpenAI, we invested four and a half, five years ago.

[Podcast Host]

Okay.

[Christopher Zook]

I mean, ChatGPT was like a barely an idea in some ways. But our partner was Vinod Khosla, Khosla Ventures. We interviewed him for the book. He is a legend in Silicon Valley. And he and his team were very early, helped start basically OpenAI. And so we were able to invest alongside them. Obviously they control the governance, so it's not CAS that they have to get, you know, a conversation with. The conversation is with Khla, Khos obviously is very meaningful.

[Podcast Host]

So Khos lead, y' all are an LP with Khos or like in their, in their syndicate or whatever?

[Christopher Zook]

Correct. Either an LP and their fund, which we are in the case of Khosla, or a co investor alongside of them. We do a tremendous amount of co investing. One of the things that we learned very early on and intentionally is literally for 25 years it's always been true. No one can be an expert in everything. So what we have been really, really good at is in certain areas, like gp, stakes, energy, we have a lot of domain expertise just because we built that over 25 years. But in most of these other areas, you know, somebody brings me a biotechnology company, I'm not going to pretend I understand the molecule better than some PhD who studied it his entire life. Right. They've forgotten more about it than I'll ever learn. We're going to partner with them and I don't have any problem paying them for their expertise, but I'm not going to get involved in something unless we're shoulder to shoulder with somebody that has an information advantage or at least has all the information to be able to make a good decision. The node code. I mean, there's no way in the world we should have would have ever invested in OpenAI that early. Because we don't understand that at the same level of a Khosla or a Peter Thiela Founders Fund or somebody like that. Yeah, we'd rather partner with them, Andrew. Same way, you know, we partner with Peter and his team at Founders Fund, and that's how we got exposure to it. We're not going to pretend we're the expert in it. We're going to invest with those that are, and we're going to be, in most cases, their largest check writer. And when you write $100 million checks or 500 million dollar checks or billion dollar checks, they tend to give you what you ask for. Within reason, of course.

[Podcast Host]

And if I am, as it relates to y', all, is the offering to your investors. Take Andrew, for example. Or just take any deal you do, whether it's tech or not, you're just getting an OpenAI. Or is it like a tech fund where you're getting exposure to a lot of things? Or is it SPVs?

[Christopher Zook]

So everything is based on theme.

[Podcast Host]

Okay.

[Christopher Zook]

You know, we're a thematic firm. We find the theme, we find the best risk reward, we find the best partners to do it with. And then we create a structure that's usually very unique. I mean, we're one of the very few places in the world that somebody can invest in a lot of the things we do, whether it be GP stakes or professional sports, and actually have liquidity where they can get out. Like people. Like, how's that possible? It's only possible because of the size of our network and the diversification that we have. But those structural advantages go back to the irresistible offer a little bit.

[Podcast Host]

Yep.

[Christopher Zook]

They're like, where in the world can somebody get out of a professional sports team after they buy a piece of the Astros?

[Podcast Host]

Yeah.

[Christopher Zook]

You know, with just whenever they want to, they can sell. Right. That's not normal.

[Podcast Host]

Yeah.

[Christopher Zook]

That's our irresistible offer. Now, in addition. Yeah, it's very much. I mean, Aria, just because we talked about it, you know, our three UVPs, and every business owner should know what their three unique value propositions are that they can deliver. All right, it's got to be three, because as Tony would say, one, two, three. Many people can't remember more than three. Okay. So we got $650 million of our own money and our own funds were the largest investor in everything we do.

[Podcast Host]

Okay.

[Christopher Zook]

2. We can get access to things that most people could never get unless they can write a $100 million check or more. And three, we can either provide structural advantages and better economics than they could get even if they went directly to something, or we don't charge management fees and we just take a percentage of the profits. Okay. That's how that's shifted over time. Well, if you're able to provide somebody with something, they can't get a piece of the Astros and you can also give them liquidity to get out if they want to. That obviously is really unique and that's a unique value proposition. To your question, though, our auditors at Deloitte will tell you immediately exactly how many the number is. I can't even remember it is, but over 25 years, we have 120 some odd funds. Yeah. Some of them are thematic in nature, like just space and defense, or just professional sports or just GP stakes. Others are funds of one asset or maybe two or three assets that are much more co investment. Typical SPVs, we call them conduits. We're a conduit to that opportunity for people. But we also do have, and we goes back to being freakish about alignment. One of the things we learned is that if you only have $5 million of the best things since sliced bread, how do you allocate that across 8,700 investors?

[Podcast Host]

Yeah.

[Christopher Zook]

Does Tony get it? Does Christopher get it? You know, does Darrell get it? Who gets it? And the answer is there's no good answer there. Yeah. So you go put it out there and it's oversubscribed 50 to 1. And everybody gets 2% of what they wanted. Nobody's happy. Yeah. So we said, okay, we're not going to do that. But you got to have a way for everybody to invest in everything we do. Otherwise you're cherry picking. Right. That's not fair either. So we have a fund of everything we do in the private markets that people can choose to invest in or not. But they know if they pass, they're missing out on some of the things we do. I mean, figure AI is a good example. The robotics company, unbelievable success story. At the level we invested in, it was way too early to do a conduit or an spv. Therefore it's only in our fund of everything. Somebody's not in it, they don't own it. But if they're in that fund, they get everything else. And the other thing that we do, that's pretty unique, going back to the kind of irresistible offer, anybody who invests in that Vehicle, our fund of everything they have right of first refusal on all the co investments that we do alongside that vehicle where we do a conduit. Yeah. So like we did, I can't say the name just because of regulatory reasons, but you know, we did an investment in a very high profile space company about a month and a half ago. Not space X. Okay. This is much earlier stage in that. Much earlier stage in that. But I mean it's a, it's like a household name in the world of space. But it's series B. Yeah. So very early. I mean we were oversubscribed four to one. Yeah. So if somebody has that right of first refusal, that's a very valuable thing for them to do. So what a lot of, a lot of advisors will do for their clients or they'll families will do is they'll just invest in our fund of everything, you know, a reasonable amount relative to their portfolio and then they, you know, pick and choose the ones they want to lean into and they have that right of first refusal.

[Podcast Host]

You've said alignment 10 times already. Can you maybe just give a few other examples of where alignment shows up that isn't that? Maybe other firms do it one way or maybe it's not even wrong, but it's not truly aligned. Like when you think about alignment, it comes in various forms. Can you just give a few examples?

[Christopher Zook]

So I'll start with GP stakes. Just because the fact that I think it's an easier place to start the world of GP stakes when you own 20% of anybody's business and you're a minority shareholder, your minority protections are very important. Yeah. So if you don't have a compensation cap as an example, what stops them from paying out all the profits just to themselves? Well, that's not aligned. If instead you cap the compensation at a reasonable level, fair bite, based on negotiation and everything's a lever in negotiation, then the vast majority of their earnings are going to be based off of the overall success of the business. Now you're aligned. Same thing as we have in almost every one of these situations. What we call a Monet clause. Right. They can't take our money and go buy a Monet. All right. That's not going to generate a return. Potentially it could be a good investment. But let's not do that. Let's make sure it's invested in people and expansion and that kind of thing. Thing. But so you're aligned in that the money has to be used for the purpose that is there. The ability to not have self dealing you know, one of the things that I made the choice 25 years ago to not do anything outside of our firm at all, except for my personal real estate art. Things that would not be suitable for our particular, you know, for our investor base. Right. I don't do anything else outside. People show me deals. This is just for your personal account. I said I have no personal account. I invest only in the things that my investors are in. Or I don't invest if it's not available to them, it's not available to me. That's an example. But I know so many people, real estate venture, etc. This is good for the client, but this is better for them. And they pick and choose where it goes. That's a hard no for us immediately. Other situations you'll see alignment get misaligned would be, you know, if the outcomes and objectives are just different. Yeah. You know, I'm looking at an opportunity right now to where it says in the LLC agreement that even if the founder passes away, the control position must stay within his family. Well, as an outside investor, that said no. Because the fact that I don't want, you know, his children, who might be great. Right. But I don't want to sign up today when they're 14.

[Podcast Host]

Yeah.

[Christopher Zook]

To know that they're going to be running the business that I own a piece of. No, thank you. Or his wife may be a brilliant business person, but I don't want to sign up for that today. Right. And I certainly don't want a whole bunch of trustees running it because we know what that looks like.

[Podcast Host]

Yeah.

[Christopher Zook]

So that's misaligned. Okay. You know, absolutely. Let's do what's best for everybody. It's not hard. Most of it comes down to just being honorable. Yep. And that's hard to ever gauge. But as a. For the most part, you know, you, after getting to know somebody for a couple of meetings or, you know, breaking bread together, you can determine where their values are. And if you're misaligned, don't do it. One things I say a lot is find great partners, be loyal to them that are great people. Then they will be loyal to you as well. So there's a lot of people say, I don't care who they are, they're a great investor. Okay. That might work. Until it doesn't. And then you find out that you're in. Maybe they stumble, but they're still going to put their interest ahead of yours. That's a problem. So that's. That's where the art of investing is. There not the science behind it.

[Podcast Host]

All right, I want to talk about sports team investing.

[Christopher Zook]

Sure.

[Podcast Host]

So one, when did this hit your radar? It seems like it's become a thing. How did this thesis become a thing? And I'm really curious, like how it all works.

[Christopher Zook]

We actually just did. For those of those folks that are on LinkedIn, you can go to our LinkedIn profile. Last week we actually dropped what we call our third Thursday themes. Normally we do third Thursday themes. It's an interview, you know, with Ian Charles, our partner in sports or you know somebody, Vinod Khosla or somebody, you know, Joe Lonsdale. That's what those are about. A particular theme. You know, I think you know, Evan Loomis, you know, Evan, we had on to do talk about defense. Right. Good partner of ours. So the third Thursday we did last week though was different. At our annual themes event, which is every basically January, early February, we just celebrated the 10th anniversary. Joe Lonsdale was our keynote. Fireside Chat. We did actually an investment for our 10th anniversary, we did a special deal and we did an investment company roundtable. Excuse me, investment committee roundtable. And so all of our investment committee, we sat up there and we kind of answered questions just like this. And it's funny because sports was the main one that got the chuckles because of the fact that I was the skeptic. I hated the idea. Why. And to answer your question, we first heard about this basically in 19.

[Podcast Host]

Okay.

[Christopher Zook]

And that's when the rules were changing. Because prior to that, no one was allowed to own a sports team in North America unless they walked on two legs.

[Podcast Host]

Right?

[Christopher Zook]

They called the two legged rule. If you didn't walk on two legs, you couldn't buy it. No private equity, no institutions, that kind of thing, just those that are individuals. Because that's what the leagues wanted. In 2019, Major League Baseball was the first to change the rules to allow very specific covered funds, as they're called, that are not conflicted. They don't own a piece of an agency, you know, there's nobody in there that's an umpire. Right. You wouldn't want that. They don't own a whole bunch of other teams themselves. So there's all these restrictions. And so Arctos got permission from the league to buy in. They called on us. And you know, everybody brings biases to investments and everybody can go on LinkedIn and watch, you know, some of the same dialog, but a lot of other stuff that we cover there that makes it worthwhile to do so. But the, the biases when People come to any investment decision, it may look like what they had that worked, or it may look like what didn't work. And it's very hard for most people to remove the emotion of this feels like a good thing or a bad thing. I'm very proud of the fact that I have this deep analytical ability to not care what it did in the past, what it was in the past, et cetera. But even I brought bias to this situation. I grew up in the era of the 80s and 90s, and as a football player and as a football coach, it's just a trophy asset. It's just for very wealthy people to own, to say they own a sports team. It loses money all the time, and hopefully it goes up in value one day. Right. That's what I thought.

[Podcast Host]

It's like, as long as egos continue to get bigger.

[Christopher Zook]

But that's a really bad reason to invest, for sure.

[Podcast Host]

But that was kind of the model. Forever is like, as long as rich people love owning great franchises, you can expect a good investment.

[Christopher Zook]

That's right. That was the thesis. That's not a thesis I was willing to back.

[Podcast Host]

Yeah.

[Christopher Zook]

So literally, it took almost two years for Arctos and my team to convince me that this was a good idea because I looked at it wrong. What I was missing, that I readily admit now, is for me, everything's a theme. What's the theme? Owning piece of the Astros. Great. What's the theme? That the Astros are great. That's not a theme.

[Podcast Host]

Yeah.

[Christopher Zook]

All right. And we miss investments because there's no specific theme around it, but it just helps us identify what we're good at and cull 2,000 investments down to what we actually can do work on. Then finally, they showed a slide about how media was changing. And so the theme was very obvious. And it hit me between the eyes. I was like, oh, we're in. And they're like, what? We've had eight meetings with you or six meetings, or whatever it was at that time. What do you mean? Now all of a sudden, I said, the theme is cord cutting. People are moving broadcasting cable to streaming. Got it. This is easy. I see the roadmap we're in. And they're like, it was that simple. I said, yes, you should have led with that. Right. Two years ago. But they hadn't really framed out the messaging on it. But they understood it as people. And people don't understand this, and they don't appreciate this enough. In 2005, 15 of the top 100 live programs watched were sports in 2025, 97 were sports.

[Podcast Host]

Wow.

[Christopher Zook]

Why? Because if you don't have to watch a commercial, why would you. Yeah, you're gonna go watch it on Amazon prime or watch it on Hulu or watch it on Fubo or whatever. So if you're an advertiser, how do you reach your audience now? You can't, unless it's a live event. So what does that do to the pricing of advertising for live events? And one only has to look at the price of a Super bowl ad as an easy benchmark. It's literally just up into the right at a very fast growing rate. Because now, 97 of the top 100, that's the only place you're going to be able to reach people. That's the only way you're going to reach your audience. Therefore, you're going to pay a lot higher price for that. And if you're a streaming service, how do you reach your audience with something different if they can just get the same program rerun everywhere else? The answer is Thursday Night Football. What's the number one sign up for Amazon prime of the entire year? Every Thursday night in the fall. Because if the only way you can watch your team play, you're going to sign up, you might drop the next day, you might drop a week later, or you may go, huh, this free shipping thing, I like it. I'm going to keep doing this. They have very sticky Paramount. When they had the wild card game on, the only place in the world you could watch, it was as a Paramount subscriber. This was two years ago, if I remember correctly. It was 30% of all Internet traffic that day during that game. They will therefore pay a lot of money for it. So the streaming rights are what drive this. And this was the other thing that I didn't realize. I kind of got it. But once I got it, it became much easier to make the investment. And this is true in North America. This is not necessarily true in other leagues outside of the Big Four. When you own your piece of Buffalo Bills, Los Angeles Chargers, when you own a piece of these teams, Dallas Cowboys, you own your 132nd of the NFL, you own your team and all your local monopoly, which, by the way, a monopoly is a pretty good thing. Yep. But you also own your 1 32nd of the league. And all this is public information that I'm going to tell you, because the Green Bay packers, technically. Republic.

[Podcast Host]

Yeah.

[Christopher Zook]

Yeah. All right. Yeah. So this is all in their filings this year. The check to every team, whether you're first place or last place, your dividend from the NFL was over $400 million.

[Podcast Host]

Holy moly.

[Christopher Zook]

So if, you know, going back to my point at the very beginning of this, if you know exactly what your revenue is going to be this year, it's pretty easy to budget. Plus you of course get all your local rights, your local stadium rights. I mean, those are 10 year contracts. The interesting thing is professional sports and GP stakes have a lot of correlation. It's not management fee driven and carry driven, but it's contractual fees and revenue. Now the Golden State warriors, which we own a piece of alongside Arctos, they did their new stadium, they have a waiting list like three years long for all of the boxes in the stadium. And these are expensive boxes. So long term contracts, sticky season ticket holders. And then obviously you do have the other things that are more driven by your win loss, which is going to be your local media, your jersey sales, how many hot dogs and, you know, beverages you sell, those kinds of things. But those are just ancillary. And one of the biggest growth opportunities because of the world of digital now is the way that advertisers are able to customize advertising to you. So as an example, if you watch a hockey game now, professional game on the ice on your TV screen is going to be a logo for something. That logo will be different for you than it is for anybody else. And it's a little eerie. But whatever you were looking up on Google the day before just might be what that is. All right. Very targeted marketing and advertising, much more effective. Therefore people are willing to pay more for it. There will be a day very soon, my grandson and granddaughter and their mom and dad live here in Fort Worth. And so Tripp, he's Christopher iii. At some point, Tripp's going to want to watch football with Pops. And I'll be able to pull out my phone and I'm going to be able to hit a couple of buttons and his face and his name will be on the jersey of the quarterback and he's going to be able to watch himself play quarterback for whatever team. Am I going to pay eight bucks for that? Absolutely. Just to be able to spend time with my grandson. Well, all that revenue is going to get split between whoever the app provider is and obviously the teams that are playing the game. Plus this thing called international growth. Right. I was in Tokyo early last year. We own a piece of the Dodgers alongside Arctos. And I mean, there's more Dodgers advertising in Tokyo than there may be in Los Angeles because of that picture. Absolutely. I mean, he is a legend. And literally the game that they played in Tokyo was oversold like five times. They could have done it in a stadium five times as large if they wanted to. So the growth in the international, whether it be Europe, Africa, Far east, it's just immense growth. So these businesses, they are growth businesses, but like any business, you gotta make sure you don't overpay. Right. And some of the prices are getting really expensive. So one of the things that's really important to us, and it's one of the reasons why, you know, Arctos and others that we partner with, they have to have a value proposition. Because if they're just providing capital, then they're a price taker. Somebody wants to sell 10% of the team, they're just paying whatever price it is. And obviously the control owner decides who gets to buy that and who doesn't. But if instead you have the biggest digital platform and you can tell this owner more about their team than they know about their own team, that's an amazing value proposition. You're still gonna have to pay a pair a fair price. Yeah, but you don't have to be a price taker. You can actually be patient because you don't just have to take whatever's available. But that's the other thing is you have a scarcity value. You only have basically two franchises that have been added in the last 25 years to any of the big four in North America. But it is very different. And this is one of the things that I will tell you that a lot of people are getting in trouble on. They're starting to say, well, sports are great. Look how much the returns are. It's not correlated to anything else. It's outperformed the S and P by a dramatic margin. It has virtually no volatility. It even made money during COVID when you weren't allowed to have any games. But it's because of meteorites. Hence this cord cutting theme. Cord cutting is an irrefutable theme. So we're like, oh, great, I'm going to go do this in minor league baseball, I'm going to go do this in European football, soccer, I'm going to go do this in cricket and rugby and all these other things. Some of them will work really well. Padel is another one that's, you know, fast growing sport. You look at, you know, pickleball, people are doing this and what they're missing is that they're not media driven. Yeah, they could be, but it's a very different path. And they're Not a monopoly. And they don't own their share of the league. So we do own a piece of Liverpool and a pair of Saint Germain. Okay. But we don't own a piece of the European, you know, commission for.

[Podcast Host]

So you have to underwrite that different.

[Christopher Zook]

You have to underwrite it differently. You have to pay a different price. And there's countless billionaires that have lost enormous amount of money on European football teams simply because the fact that you can get relegated, you then, you know, it's the opposite effect. You get relegated down, your media value is dropped dramatically. That obviously hurts your cash flow, it hurts your business franchise. It doesn't matter how well the league is doing, it's only really how you do. Which also means your player costs are usually much, much, much higher. Whereas here in North America, you have controlled player costs. They're negotiated as a league, not at the individual, you know, team level. The league obviously sets those guardrails and the unions do that through collective bargaining. So therefore, everybody going back to alignment these valuations are helping dramatically the players themselves because of the fact that the players are benefiting from all these new sources of revenue because they're more a percentage of the overall revenue of these businesses. That means they benefit from these meteorites. You know, it's a whole, whole different kettle of fish when you start talking about outside of the Big four in North.

[Podcast Host]

Yeah, I mean, you, you kind of answered it, the Big Four. Like, if you look at ufc, even when UFC started, there were several other combat leagues. Maybe you're interested in the UFC now that it's made it, but you're not interested in the startups because at that point you also don't even know what league is going to be the league.

[Christopher Zook]

Correct. It's very much a venture capital investment at that point. So you have to underwrite it as that, knowing it could be a zero or maybe it makes a lot of money. But, you know, goes back to the point of what's the worst case scenario? If you can live with that, the upside will take care of itself. And, you know, we look at, you know, we own a piece of Aston Martin's Formula one team alongside Arctos. You know, we own a piece of a lot of teams alongside other folks, but they're all very differently underwritten based on what their control provisions are, what their share of the economics are. And people can't just blindly say, that's why we haven't done anything in college yet. I mean, you know, it's just right now nobody knows what the rules are. And until that happens, you don't really know what the economic model is going to be. Issuing debt to a conference or a team that can work, but goes back to the same point of, you know, when you loan somebody money, it's a different kind of alignment as opposed to when you're partnering with them to make them grow and be bigger and better. That's what we're waiting for, more in the world of college sports.

[Podcast Host]

All right, so you met Tony in, in 2021. There was a huge inflection point. I think the next big inflection point has to be this podcast. So if we're sitting here five years from now, like I'm assuming you're planning your business out and we came back five years. What is the plan for the next five years?

[Christopher Zook]

One of the things that Tony and I have both been very passionate about, we wrote about in the book, is the democratization of private investments. Yeah. So we actually were working very hard with some of our friends in Congress to get a law passed to allow people to take a test to become an accredited investor. Well, that was passed through the House. It was stuck in Senate Finance Committee. The election happened. And then lo and behold, in June of last year, the sec, with the stroke of a pen said you can now invest in alternative assets of a certain type. With no accreditation requirement, anyone in the world, and at a $2,500 minimum, can now invest and own a piece of SpaceX and the Astros and everything that we've talked about that didn't exist literally eight months ago, that has challenges that come with it, but also opportunities. And so we are very excited about that because of the fact that one of the things we did when we launched the book is we specifically, if we're going to tell people this is the right type of asset to own to diversify your portfolio, get 8 to 15 non correlated assets. That's the holy grail of investing. If you do that, your portfolio should, according to Markowitz, who won the Nobel Prize, should do more return with lower risk. Okay. Which is counterintuitive, but that's what he proved when he won the Nobel Prize. But that's what you need to do. But oh, by the way, you can't. That wasn't something we felt good about. So we created a way for investors to actually do that, which up to six months ago, eight months ago, you know, somebody had to be at least an accredited investor, which is why we were lobbying Congress to be able to work through that. Now literally everybody can do it. And so that we've expanded and we've actually launched a second fund that is now available to the entire world. And the more that we can open up, the opportunity for advisors to use for their clients. I mean, perfect example, I met with an advisor the other day. Average clients 1.5 million. So good size. But if you're going to go diversify them into alternative investments which have a $250,000 minimum or million dollar minimum, they can't even participate. And so now that investor, that advisor could put, you know, 3%, 10%, whatever's appropriate for that client at $150,000 into a diversified portfolio that gives them exposure to all these assets they would not get any other way. So five years from now, I think what you're going to see in our business and I think in the industry as a whole is this exponential growth among the number of people that can invest in alternatives that have never been able to before. And that's going to create opportunity and I think the ability for people to control a little bit more of their destiny. Because right now we have this huge problem for investors that are not in alternatives. And it's not necessarily, doesn't mean it's not going to continue to be successful, but it's a problem nonetheless. Most people don't know the number of publicly traded companies in the United States has dropped by more than 50% over the last 20 years. And so 92% I believe it is, of the companies in the United States that are above $100 million of revenue, that's good sized company. 92% of them are private. So you're missing 80, you know, 92%. If you're just in the public markets now, there's some amazing companies, whether it be Nvidia or Amazon or you know, you know, Google or whatever, those are great businesses, but they're multi trillion dollar companies. And then you have not a lot of other of others to choose from. Which means in the s and P500 now, 46% of the S&P500 is 10 names. Yeah. So it takes the other 490 to make up the other 54%. So when people think they're diversified, they're not as diversified as they, as they think they are. Which means in a year like 2022, when the market gets kicked in the teeth, which you know, it happened in April, Right. They lose a lot of money really fast. And unfortunately what happens to so many investors is they panic and they've been told, be a long term investor, just ride it out. It'll be okay. But at a certain point, and I've seen it multiple times in my career, that uncle point, they hit it and they just can't stand it anymore and they bail. And at the worst possible time. Yeah. So the more diversified they are, the easier it is to have a smoother roller coaster ride. We refer to it as get off the roller coaster, get on the escalator. Yeah, escalators not too bumpy of a ride, typically. So get on the escalator. Just through diversification. That's what I think is what we'll see over the next five years. And it will be a very large amount of capital that will shift.

[Podcast Host]

All right. In five years, we're going to come back and do this.

[Christopher Zook]

I love it.

[Podcast Host]

Thank you for joining me today.

[Christopher Zook]

Thank you for having me. It's my honor.

[Podcast Host]

This was awesome.

[Christopher Zook]

Absolutely.